The travel industry has been forced to rip up big chunks of its playbook and start fresh. In comes travel subscriptions
LinkedIn calls it the Netflix model for travel, and it fits. The pandemic wreaked havoc on the travel industry in 2020: international travel all but halted for many countries; airlines filed for bankruptcy protection; traditional tourist hotspots have become coldspots In response, the travel industry has been forced to rip up big chunks of its playbook and start fresh.
In comes travel subscriptions.
“In Southeast Asia, we’ve already seen airlines testing the waters with this concept,” says Hannah Pearson, founder of Kuala Lumpur-based travel consulting company Pear Anderson.
“AirAsia launched its Unlimited Pass for domestic flights in Malaysia earlier this year and given that they’ve now rolled it out in Thailand, the Philippines, and Indonesia, we can deduce that it has been a success.”
Another area Pearson could see taking off? Subscription ‘work-ations’, where “hotel chains [offer] flexible bookings and benefits for customers to stay and work out of any of their hotels across the country.”
Travel industry wipeout
More than two decades of growth in airline passenger traffic were erased in 2020, a new report found.
“The pandemic and its consequences wiped out 21 years of global passenger traffic growth in a matter of months, reducing traffic this year to levels last seen in 1999,” said Cirium, a travel data and analytics company.
“In comparison to last year, passenger traffic is estimated to be down 67% in 2020,” the firm said in a press release.
Only 2.9 trillion global revenue passenger kilometers (RPKs) were recorded in 2020, versus 8.7 trillion in 2019.
Airlines operated 16.8 million flights from Jan. 1 to Dec. 20, 2020. That’s down from 33.2 million in the same period in 2019.
More than 40 airlines completely ceased or suspended operations, and experts expect more to fail in 2021, according to Cirium.
International flights fell 68% compared with 2019, while domestic travel was down 40%.
Cirium expects passenger demand for air travel to bounce back in 2024 or 2025, with domestic and leisure traffic being the first segments to show “sustained recovery.”
Before COVID-19, many airlines were skeptical about subscription services. They feared selling cheap seats and not having enough inventory available for big-spenders. But times may be changing.
Since March 2020, as coronavirus gripped the industry, airlines were hemorrhaging customers.
In many regions, business has improved, but high-yield corporate travelers have not come back en masse, and no one is sure when they will. Many airlines are bracing for a slow recovery, and they’ll take revenue anywhere they can.
People who book multiple flights per week or per month, and who pay a variety of constantly-fluctuating prices would jump at the chance to establish a fixed monthly cost with the option to fly when they need to.
And today, more than ever, travelers want the flexibility to extend their stay by maximizing their membership travel points, without extra costs.
2021 travel trends include dateless departures to a specific destination and rebooking without losing money.
People want travel bubbles, which are smaller and private group tours designed to keep your group socially distant from other travelers.
Airlines, to survive, might need to offer virus testing and resorts could soon as well do the same.
TripAdvisor is one company set to offer a new subscription service, which will reportedly roll out in the next few months. In the company’s Q3 shareholder letter, CEO Steve Kaufer said: “Subscribers will be able to access valuable deals and perks across tens of thousands of top-ranked hotels as well as exclusive savings on our nearly 400,000 bookable experiences and, like other gold standard consumer subscription services, we plan to add more benefits to deliver more value to consumers over time.”
The downside of subscription travel
In the recent past, subscription programs have had at least two problems.
One, many traditional airline back-end reservations systems are not set up to handle subscription models, so airlines either must build their platforms, or hire specialized companies towards that purpose.
And two, no one knows exactly how to price them so they can generate incremental revenue without cannibalizing existing revenue.
Events to jumpstart the travel industry
Ross Veitch, CEO, and co-founder of Wego tells Arabian Business that The Tokyo Olympics in July and the Dubai Expo in October are two high-profile mega-events that will prove large-scale international travel and events are again possible.
“I think that in places like the Middle East and Asia is where business is largely done face-to-face and you show respect by appearing in person, not via video conferencing.
The MENA travel industry will have recovered to close to 2019 levels by the end of 2021, according to our baseline forecast, though more optimistic and pessimistic scenarios are also plausible,” he said.
Many countries still have their borders closed for international travelers and have in place mandatory 14-day quarantines, which effectively kills demand for travel.
“Pre-flight testing, smart contact tracing, and widespread surveillance testing are the keys to being able to safely restart international travel,” he opined.